Broadband internet and enterprise innovation

Abstract

Based on microdata from China's listed companies and macrodata for broadband internet access in prefecture-level cities, this paper explores the relationship between broadband internet and enterprise innovation. Using the change in market concentration caused by the North–South separation reform of China Telecom in 2002 as an instrumental variable, the results show that in general, a 1% increase in broadband internet access results in a 1.395% increase in the number of corporate patents. Specifically, the number of valid patents, patent citations and valid patent citations, reflecting patent quality, increases by 1.499%, 0.920% and 0.763%, respectively. The mechanistic analysis shows that broadband internet access contributes to increasing the number of R&D personnel and personal innovation efficiency, enhancing enterprises' willingness to innovate, and easing financing constraints. Further analysis suggests that broadband internet access mainly promotes invention patents rather than design patents. The innovation effect is more evident among high-tech, inventor-intensive, state-owned enterprises and enterprises located in the non-southeastern coastal region of China.